R.BRENDAN
LEARY


phone: 650 207 2100
email:
web: www.brendanleary.com





Top 1% of Coldwell Banker Internationally
#1 Agent in CB Palo Alto Offices
1997, 1998, 1999, 2001, 2002, 2004, 2005

2005 Transactions | Year to Date 2005

1220 Pitman Avenue | Palo Alto

1874 Park Boulevard | Palo Alto

1160 Bryant Street | Palo Alto

2195 Amherst Street | Palo Alto

918 Cowper Street | Palo Alto

4176 Donald Drive | Palo Alto

880 Forest Avenue | Palo Alto

267 Santa Rita Avenue | Palo Alto

2349 Dartmouth Street | Palo Alto

816 Sutter Avenue | Palo Alto

712 Coastland Drive | Palo Alto

236 Churchill Avenue | Palo Alto

940 Elsinore Drive | Palo Alto

353 Melville Avenue | Palo Alto

440 Santa Rita Avenue | Menlo Park

1140 Cloud Avenue | Menlo Park

176 Seminary Drive | Menlo Park

803 18th Avenue | Menlo Park

271 De Anza Lane | Los Altos

1485 Oakhurst Avenue | Los Altos

2 Leon Way | Atherton

54 Maple Avenue | Atherton

42 Ridge View Drive | Atherton

50 Black Fox Way | Redwood City

162 Rutherford Avenue | Redwood City

1016 Valota Road | Redwood City

954 Bellomo Avenue | Sunnyvale

1160 Shenandoah Drive | Sunnyvale

509 Sierra Vista Avenue #9 | Mountain View

938 Clark Avenue #47 | Mountain View

1140 Carlos Privada | Mountain View

1234 Isabelle Avenue | Mountain View

2080 Marich Way #16 | Mountain View

150 N Balsamina Way | Portola Valley

1094 Hewitt Drive | San Carlos

1348 Mildred Avenue | San Jose

19874 Park Drive | Saratoga

20 Big Pine Road | Woodside

Recent media enthusiasm to report evidence of a change in the market dynamics has generated a great deal of discussion. Our analysis of the 2005 market to date is as follows:

Q1

Primarily, we look at the market in two dimensions, price and volume. January and February this year saw very low volume due to the lack of new property listings appearing on the market. This resulted in a signifi cant price jump in March and April.

To illustrate the point, in March we listed a beautiful Craftsman home in the Professorville neighborhood of Palo Alto. All recent sales evidence pointed to a realistic valuation in the vicinity of $2.2m. We listed it at $2.4m due to our observation of the limited competition. We sold the property the fi rst day for just under $3.0m. In this case this represents a 20% jump in price, in other words, a 20% increase in value in a very brief period of time.

Q 2&3

List prices, and the expectations of sellers, consistently moved up. Sellers routinely received multiple offers and achieved prices above their expectations. The “new prices” refl ected the same 19-20% rise from the prices at the start of the year. Sellers were expecting more, thus list prices continued to go up.

Start Q4

By the end of September, the buyers’ willingness to pay had tapered off. Sellers are still hoping for multiple offers and buyers are still looking at listing prices and thinking “list price & up”. Sellers still want more, buyers are very price conscious, thus there is a signifi cant increase in inventory. The list prices refl ecting a 30% annual increase are now being reduced to refl ect a 20% increase. This results in a sale.

The Future – Stay tuned

The fundamentals of the market remain the same. Supply in our area is relatively fi xed, demand is consistent. Firm demand doesn’t mean that a buyer will pay anything the seller asks. The Bay Area in general and the Peninsula in particular are places many, many people want to be. Borrowing money at some point in the near future should become more expensive, supply has doubled, and consumer confi dence is the only uncertainty. We will know which direction we are headed by the end of the year. So, stay tuned and we will keep you informed.

Of all the real estate studies and media reports to which we have been exposed in recent months, the most rigorous and informative we have seen is a paper fi rst published in the Fall 2005 Journal of Economics Perspectives. The paper is a combined work from the Federal Reserve, Columbia Business School and The Wharton School entitled “Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions”
(http://www.ny.frb.org/research/staff_reports/sr218.pdf).

The study outlines a disciplined method of assessing the “ownership vs. rent & invest” dilemma that we all face. Being economists, the authors only approach this from a fi nancial point of view and do not mention the intangible benefi ts of homeownership. Overall, it is an excellent method of analysis. Be prepared to read it over more than once. The study also reviews the past 25 years comparing the cost of home ownership, incomes and cost of renting for 46 metropolitan areas in the US. The overall conclusion is that since 1995 the cost of owning rose relative to the cost of renting but not to levels that made houses look overvalued.

RBL





Our Read of 2006 – Coming in December